The Lead: Microsoft posts record revenues, no word on new CEO
With its CEO taking his last lap after 14 years at the helm, Microsoft announced its biggest quarter in history Thursday, as sales of the new Xbox One and Surface tablets helped the company record a successful holiday shopping quarter.
Microsoft reported earnings of $6.56 billion, or 78 cents a share, on total revenues of $24.52 billion, with Surface revenue more than doubling from the previous quarter to nearly $900 million and the new Xbox One gaming console selling 3.9 million units during the three-month period.
"The investments we are making in devices and services that deliver high-value experiences to our customers, and the work we are doing with our partners, are driving strong results and positioning us well for long-term growth," CEO Steve Ballmer said in Thursday's earnings announcement. Ballmer announced in August that he would step down within a year, once Microsoft found a replacement; the company did not provide an update on the CEO search Thursday.
Investors an analysts applauded Microsoft's performance, with shares rising more than 4 percent in late trading after gaining 0.4 percent to $36.06 in the regular session.
"It's a good print to ride off into the sunset with, for the current CEO," BGC Financial analyst Colin Gillis told Reuters.
Microsoft has suffered from negative perception as the personal-computer industry has reached record declines, but its enterprise sales have helped maintain large revenue streams while waiting for results from the Surface and the Xbox One's debut, and Thursday's report seemed to be positive for all aspects of the business.
"The enterprise sales area looked pretty strong. Xbox was a winner this year and sales of Windows to PC makers weren't as bad as usual," Fort Pitt Capital Group analyst Kim Forrest told Bloomberg News, summing up the report as "very good numbers."
Still, there are challenges ahead for the Washington tech giant: Few will feel comfortable with the company's trajectory without knowing who its next leader will be, and smartphone sales for recent hardware acquisition Nokia fell off a cliff in a separate report released earlier Thursday.
"I would call it a herculean challenge to turn around that mobile business," FBR Capital Markets analyst Daniel Ives told The Associated Press. "They have a lot of wood to chop ahead."
SV150 market report: Netflix soars to record as Wall Street tanks
Wall Street had a rough day Thursday, as the Dow Jones fell more than 1 percent and the Standard & Poor's 500 declined 0.9 percent. Silicon valley tech stocks outperformed the rest of the market, however, with the SV150 declining just 0.1 percent thanks to a huge jump from Netflix.
Netflix flew to an all-time intraday high of $395.63 and closed with a 16.5 percent gain at $388.72 after announcing quarterly results Wednesday that beat analysts projections for profits and subscriber growth. Analysts were effusive in their praise, with bulls pointing out the all-around gains in the report and bears hiking their price targets while still calling the stock too pricey. Of note to many was Netflix's promise to eventually stick to three pricing plans for its streaming service while grandfathering current subscribers to avoid the stick shock that almost ruined the company in 2011.
Apple (AAPL) also managed to gain Thursday despite the overall market decline, increasing 0.9 percent to $556.18 after announcing an impending fix to an iPhone issue known as "the white screen of death" and a Wall Street Journal report that contended the next iPhone will have a larger screen. The Cupertino tech giant also faced more pressure from activist investor Carl Icahn, who announced the purchase of another $500 million in Apple stock for a total investment of $3.6 billion, and released an open letter calling for greater investor return. eBay (EBAY) is also facing agitation from Icahn, announcing Wednesday in its quarterly earnings report that he is pushing the San Jose company to spin off its PayPal online payments unit; eBay gained 1 percent to $54.94 Thursday.
Tesla gained 1.7 percent to $181.50 after revealing its pricing plan for the Model S in China, which will involve the same base price charged elsewhere, though Chinese tariffs and other costs wist push the price tag up to $121,000. Twitter gained 0.6 percent to $62.80 while locking up a deal for new offices in New York, while rival Facebook declined 1.5 percent to $56.63. Yahoo (YHOO) fell 2 percent to $39.39 while doubts about its advertising business persisted, and Hewlett-Packard (HPQ) dropped 1.6 percent to $29.37 before a late-afternoon announcement that the Palo Alto tech giant had sold its Palm mobile patents to Qualcomm.
Up: Netflix, Tesla, eBay, NetApp, Apple, Twitter, Oracle
The SV150 index of Silicon Valley's largest tech companies: Down 2.05, or 0.13 percent, to 1,537.99
The tech-heavy Nasdaq composite index: Down 24.13, or 0.57 percent, to 4,218.87
The blue chip Dow Jones industrial average: 175.99, or 1.07 percent, to 16,197.35
And the widely watched Standard & Poor's 500 index: Down 16.4, or 0.89 percent, to 1,828.46
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.